Oil and gas: from boom and bust to energy transition
Consolidation and cost reduction across the oil and gas sector are unavoidable consequences of maturing assets, but they are also critical to an effective energy transition. As businesses on both sides of the Atlantic prepare for a decline in demand, we ask what does the immediate future look like for oil and gas?
US oil and gas policy and consolidation
Despite a favourable “drill baby, drill” policy towards oil and gas in the US, consolidation and cost reduction are very much in evidence across the sector.
In the short-term, increased output from OPEC+ and economic uncertainty due to unpredictable US trade policies have contributed to a slump in crude prices, pushing down oil company earnings to their lowest since the Covid-19 pandemic.
Recent major US oil and gas mergers include ExxonMobil's $59.5bn acquisition of Pioneer Natural Resources, Chevron's $53bn acquisition of Hess Corporation and Diamondback Energy's $26bn merger with Endeavor Energy. However, activity is down from the record highs of 2023-2024, driven by the macroeconomic uncertainty linked to the Trump administration’s trade policies and geopolitical uncertainty.
ConocoPhillips recently announced it would lay off up to 25% of staff to cut costs. This follows similar announcements by majors Chevron and BP and the world's largest oil service providers SLB and Halliburton.
Oil and gas cycles and capital discipline
Although many across the industry have experienced ‘boom or bust’ cycles in the oil and gas sector over their careers, this time feels different. The scale of consolidation, capital discipline and significant cost control measures feel like they are not only for the short-term but also very much driven by the longer-term natural decline of many US oil and gas assets.
Producing basins are maturing and the costs of exploration and production are increasing due to technical challenges, macroeconomic factors and market uncertainty. It is therefore natural for operators to take consolidation and cost control opportunities to address these challenges, making the newly formed groups more resilient in an increasingly volatile world.
UK oil and gas strategy: mergers, jobs and energy policy
Looking to the UK, many similarities are evident in the strategic direction for North Sea oil and gas, albeit against a very different government policy backdrop.
In the UK, deal activity is down on both volume and value across the last year. However, these results are skewed by the Helmerich & Payne acquisition of KCA Deutag International and the Ithaca Energy acquisition of Eni's UK assets, both highly significant transactions announced in the first half of 2024. Indeed, there have been a number of significant transactions in the UK over the last year.
In December 2024, Equinor and Shell announced that they would be combining their UK offshore oil and gas assets, with the creation of Adura, forming the UK's largest independent producer. Repsol Resources and NEO Energy completed a merger of their UK North Sea assets in July 2025, creating Neo Next. Both transactions cited increased scale and cost efficiencies as the driving factors behind these decisions and are among other similar ‘mergers’ that have been mooted in the last 12 months.
Furthermore, job losses across the sector have been widely reported and seem to have become a weekly occurrence of late. Despite dark clouds hovering over UK oil and gas, organisations are adapting and developing strategies to right-size and continue to extract reserves. Industry insiders at the recent SPE Offshore Europe event in Aberdeen were virtually in unanimous agreement that North Sea oil and gas should be part of an “and, not or” or “additive” energy transition policy.
Leading figures support this view. Jurgen Maier, chairman of Great British Energy, was recently quoted as saying “oil and gas is our foundation” and urging closer collaboration between traditional and renewable energy firms. Greg Jackson, chief executive of Octopus Energy, said exploiting domestic reserves was cleaner than relying on imported liquefied natural gas (LNG).
Similarly, with the UK opposition political parties increasingly aligning themselves with the industry in supporting a future where oil and gas is a key part of the energy transition, the pressure on current government policy has ramped up.
Conclusion: oil and gas in the energy transition
Despite significant challenges, investors and organisations continue to show faith in the oil and gas sector. They can play a critical part in an additive energy transition, where domestically produced oil and gas is a significant part of the energy mix for the foreseeable future.
Consolidating oil and gas assets and streamlining operations can prolong energy supply and security while such resources are needed. In doing so, oil and gas companies can help keep energy costs down.
How we can help your oil and gas business
With extensive experience working with clients in the oil and gas sector across the UK and globally, we are dedicated to supporting businesses in the industry across our Audit, Tax and Consulting lines of service. Our Aberdeen based oil and gas team possess deep industry knowledge which enables our clients to comply with complex regulations, minimise risks, and maximise new opportunities to reach their business goals.
If you would like to discuss the impact for your energy and natural resources business, please contact Grant Morrison.
Our deal services team provides tailored advice across the full transaction lifecycle, drawing on our deep industry knowledge, technical expertise and global presence. If you would like to discuss how RSM can support your business with a transaction, please contact Shannon Dowdles.